Central Bank of Ireland Publishes Consumer Protection Outlook 2020

The Central Bank of Ireland (the Central Bank) published its Consumer Protection Outlook Report for 2020 (the Report) on 9 March 2020. The Report details the Central Bank’s consumer protection priorities for the year ahead and sets out the Central Bank’s expectations of what insurers, intermediaries and other regulated financial services providers should do to minimise key risks to consumers of financial services.

The Report highlights key cross sectoral risks for 2020, many of which are particularly relevant to the insurance sector. In this article we consider the key points arising from these risks.

Lack of Consumer-Focused Culture

Firms are expected to maintain a consumer-focused culture, which is reflected in every business area and every stage of the employee lifecycle – from recruitment to promotion and remuneration policies. The Central Bank’s focus on this area was seen recently in the changes to the Consumer Protection Code 2012 (the CPC) which incorporated new rules in the area of commission payments and entertainment for product producers and financial intermediaries. We discussed these changes previously here. 

A review of the intermediary sector’s compliance with disclosure requirements in relation to fees and commissions is also listed as a 2020 priority.

Ineffective Disclosure

Firms must consider how they can improve communication, sales and marketing material in order to allow the consumer to make an informed decision.  Ensuring that terms and conditions are clear and that they can demonstrate that there is an appropriate product oversight and governance process is key.

The recent changes to disclosure requirements for the non-life sector, including the extension of the renewal notification period from 15 to 20 days for non-life policies and other changes to motor insurance disclosures is highlighted as a case study in the Report.

Poor Governance and Oversight of Outsourcing Arrangements

Ensuring effective oversight of outsourcing arrangements by assigning responsibility for the task to relevant individuals, functions and/or committees with the appropriate skills and knowledge is emphasised in the Report. Again, the insurance sector is highlighted as a case study. The Central Bank reviews the controls that motor insurers have in place to ensure that telematic data collected by third party firms which supply tracking devices or ‘black boxes’ is used in a way that ensures consumers are being treated fairly. The Report also highlights that firms seeking authorisation are increasingly engaging in high levels of outsourcing.

Information Technology and Cyber Risks

It is expected that responsibility for cyber-resilience is to take place at board and senior management level. Firms should implement best practice in managing the security of personal and financial data.

Risks from Brexit

The Report highlights the importance of consumer protection considerations in Brexit contingency planning. Firms should ensure that there is minimum disruption to consumers and keep customers up to date so that they can plan accordingly. 

Priorities for 2020 

In response to this sectoral risk analysis, the Central Bank has identified priorities for 2020. Of particular importance to the insurance sector is the emphasis in the Report on gatekeeping and authorisations. 

Authorisations

The Central Bank states that it proposes to further enhance its gatekeeping process to ensure a robust and effective authorisation regime exists for all firms and that the individuals who run them are fit and proper. Substance is highlighted as a key concern in the Report. In particular, the Central Bank states that it is challenging firms relocating from the UK on the credibility of their proposals. The Report also notes that the Central Bank is now responsible for supervising complex firms such as broker dealers, which are new to the Irish market.

Other priorities include:

• CPC: Strengthening the consumer protection framework and advance the review of the CPC, including a plan to transfer the CPC into regulations.
• Culture: Driving boards and senior management to embed effective consumer-focused cultures, with a strong focus on the insurance and banking sectors. The review of differential pricing in the insurance sector and ‘big data’ is highlighted here.
• Supervision: Deploying assertive risk-based supervision of firms’ management of conduct risk in order to protect consumers from those risks caused by the firms’ behaviour. The Central Bank pledges to review the insurance sector’s compliance with (i) disclosure requirements for motor insurance, (ii) product oversight and governance requirements for life assurance and (iii) disclosure obligations on performance measures and remuneration.
• Regulatory Framework: Influencing and shaping the regulatory framework for protecting consumers, domestically, in Europe, and internationally.

If you would like to discuss any aspect of the above, please get in touch with any member of the Insurance team at William Fry.

Contributed by Claire O’Connor